NOTICE: IC § 6-8.1-3-3.5 and IC § 4-22-7-7 require the publication of this document in the Indiana Register. This document provides the general public with information about the Department's official position concerning a specific set of facts and issues. This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Letter of Findings.

Company did not provide sufficient evidence for the Department to abate the assessed penalty and interest.

I. Tax Administration–Penalty and interest.

Authority: IC § 6-3-4-8; IC § 6-8.1-5-1; IC § 6-8.1-10-2.1; IC § 6-8.1-10-1; Indiana Department of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 3.1-1-97; 45 IAC 15-11-2.

Taxpayer protests the penalty and interest assessed for late payment of withholding tax.

Taxpayer is an Indiana company that failed to timely pay withholding tax which it collected from its employees for the month of October 2018. Although it did eventually pay withholding tax, the Indiana Department of Revenue ("Department") imposed a penalty and interest on the late payment. Taxpayer protested the imposition of penalty and interest. In its protest, Taxpayer opted for the Department to make its written decision based on the materials sent in with the protest. Therefore, no administrative hearing was held. This Letter of Findings is written based on the materials in the protest file. Further facts will be supplied as required.

I. Tax Administration–Penalty and interest.

Taxpayer protests the imposition of penalty and interest associated with the late payment of its October 2018 withholding tax. The Department notes that it is not permitted to waive interest under IC § 6-8.1-10-1(e). Conversely, penalty waiver is permitted if the taxpayer shows that the failure to timely pay the full amount of the tax was due to reasonable cause and not due to willful neglect.

As a threshold issue, it is the Taxpayer's responsibility to establish that the existing tax assessment is incorrect. As stated in IC § 6-8.1-5-1(c), "The notice of proposed assessment is prima facie evidence that the [D]epartment's claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. Further, "[W]hen [courts] examine a statute that an agency is charged with enforcing . . . [courts] defer to the agency's reasonable interpretation of the statute even over an equally reasonable interpretation by another party." Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014)(internal quotes omitted). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference.

IC § 6-3-4-8(a) requires an employer to "withhold, collect, and pay over income tax on wages paid by such employer to such employee . . . [in] the amount prescribed in withholding instructions issued by the department." IC § 6-3-4-8(a)(1) specifically provides that the employer is liable for the amount that it was required to withhold. These statutory requirements are restated in 45 IAC 3.1-1-97, which also explains that, "In the case of delinquency or nonpayment of withholding tax, the employer is liable for such tax, penalties, and interest." Id.

In this case, the Department issued a negligence penalty for the delinquent liability. 45 IAC 15-11-2(b) clarifies the standard for the imposition of the negligence penalty as follows:

The Department waives negligence penalties in the event of an unusual error and when the taxpayer demonstrates a good compliance record. 45 IAC 15-11-2(c) explains that:

The Department imposed a penalty on the basis that Taxpayer did not remit taxes to the Department by the due date. Taxpayer does not challenge that its payment was late, but instead asks the Department to consider its history of paying withholding taxes on time. Taxpayer takes the position that its past on-time payments justify waiving the assessed penalty.

In light of Taxpayer's argument, the Department reviewed the Taxpayer's payment records. Taxpayer has had multiple late payments in its recent history, including a waived penalty assessment in the year prior to this assessment. Based on the Taxpayer's recent non-compliance and lack of support for its claim that the delayed payment was an outlier, the Department denies the Taxpayer's request to waive this penalty. As explained above, interest may not be waived.

Taxpayer's protest of the imposition of interest and penalty is denied.

April 30, 2019